Q: I am emigrating soon, and would like to wind my business down. I currently have significant funds in my business account. What is the most tax efficient way to go about this?
Jul 27 2009
Answered by: Clive Lewis Ask a question
You do not say whether the format of your business is a sole trader, a partnership or a limited company. Your question leads me to suspect that it is a limited company. There is an HMRC concession which allows for the money remaining in the bank account of a limited company which has ceased trading and is closing down to be distributed as capital. This means that Capital Gains Tax (CGT) will be payable at 10 per cent (Entrepreneurs Relief) of the gain (after your CGT annual exemption of £10,100 in 2009/10). If this HMRC concession is not available the distribution will be treated as an income distribution (dividend).
If the business is not a limited company but a sole trader or partnership there is no tax restriction on taking out any remaining money in the business bank account. This is because drawings as tax on a sole trader are levied on profits not cash drawings. To find out more go to the HMRC website.
If you are emigrating you will need to complete a form notifying HMRC that you are leaving the UK. You may want to apply for ‘split year treatment’ whereby you are treated as part resident and part non-resident for the year of your departure from the UK. As a non-resident then your non-UK income will not be taxed in the UK. Your UK income would be subject to UK taxation but, if the country you are emigrating to has a double taxation agreement with the UK, you can offset the UK tax against the taxation payable in that country.
This is a complex area and you might be advised to use the services of a chartered accountant, if you do not already have one. You can find a chartered accountant at the ICAEW website.
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